Home Money Scottish Mortgage backs calls to scrap ‘bizarre’ EU rules on investment trusts that risk harming millions of British savers

Scottish Mortgage backs calls to scrap ‘bizarre’ EU rules on investment trusts that risk harming millions of British savers

by Elijah
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Hurting savers: Many trust costs are double-counted because of the way the Financial Conduct Authority interprets EU rules.

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One of the UK’s most popular investment funds is backing calls to scrap “bizarre” EU rules that risk harming millions of British savers.

Scottish Mortgage, which is listed on the FTSE 100, said trusts are currently caught in a strange situation where many of their costs are being double-counted. This is due to the way the City’s watchdog, the Financial Conduct Authority (FCA), interprets EU rules.

The UK has no obligation to enforce these regulations now that it has left the bloc.

Scottish Mortgage is valued at £11.1bn. Small savers have piled in as their bets on US technology companies have generated significant long-term rewards, although their shares have retreated from a 2021 high.

His intervention follows comments from his peers in the House to include former Pensions Minister Baroness Ros Altmann. She has warned that investment trusts are running out of cash and have become vulnerable to foreign takeovers.

Hurting savers: Many trust costs are double-counted because of the way the Financial Conduct Authority interprets EU rules.

Hurting savers: Many trust costs are double-counted because of the way the Financial Conduct Authority interprets EU rules.

Critics say there are flaws in the way the regulator insists investment costs should be calculated.

They argue that these rules, which are not used by any other country, make it appear that investing in British trusts is more expensive than it really is.

Altmann, backed by a cross-party group of MPs and peers, is currently pushing legislation that would remove the rules through the Lords.

“No one benefits from an unequal playing field,” said Stewart Heggie, commercial director at Scottish Mortgage Investment Trust.

He added: “A common sense approach is needed to find a quick solution and we support the proposals made by, among others, Baroness Altmann.”

His comments were echoed by James Hart, chief investment officer at FTSE 250-listed Witan Investment Trust.

He warned that if the issue was not resolved, “vital sectors” of the UK economy could end up struggling for cash and “in the hands of foreign owners rather than our own savers”.

Hart said the investment trust sector has been serving ordinary people who want to invest in the stock market “for more than 150 years and still offers one of the best structures to grow your wealth.”

“It would be a real shame if lawmakers missed the opportunity to level the playing field and perhaps permanently damage a great British success story,” he added.

Investment trusts have been a key part of the stock market for more than a century and account for around a third of the FTSE 250.

In Victorian times, they were used to raise money to build railways and other projects around the world.

More than 360 trusts, with £267 billion in assets, are listed in London.

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